Can we teach old dogs new tricks? Increasing giving through Wills

We’re delighted to have this guest post from Ross Anderson, Director on the Board of the Include a Charity campaign and Christopher Baker, a Research Fellow at the Asia-Pacific Centre for Social Investment and Philanthropy. There are few people in Australia better placed to talk about charitable giving via Wills.

We all know that there is significant demographic change underway in Australia.  The next decade will see Australia’s population exceed 25 million and age dramatically. It will also see members of the population boom that followed the end of World War II (Baby Boomers born between 1946-1964) firstly retiring and then ultimately passing away in increasingly large numbers.

Baby Boomers currently comprise 24% of our population, yet they own over 50% of our nation’s private wealth. By 2020, when most of those ‘never-grow-old’ Baby Boomers will be in their 60’s and 70’s, we will witness the start of the biggest inter-generational wealth transfer in our history.

No wonder charities are stepping-up their efforts to generate increased income from gifts in Wills. This is one of the most logical and obvious sustainable funding strategies that they could possibly adopt given these demographic predictions. But we must act together now to truly harness the powerful philanthropic effects of an increasing mortality rate and the intergenerational transfer of huge wealth that is anticipated to occur over the next 40 years.

What do we know about this form of philanthropy?

Not that much as it happens. We know that charitable giving through Wills in Australia is wildly out of kilter with levels of ‘giving whilst living’ via the support we give to charities whilst we’re alive.

The latest ATO figures show that 4.4 million Australian taxpayers (or 35.55% of the Australian taxpaying population) made tax-deductible donations totalling $1.96bn in 2009-10. Other studies estimate that almost 90% of us support charities in some shape or form.

So why is it that only 7% of us have been sufficiently inspired to include gifts to our favourite charities in our Wills?

A detailed study at Swinburne University of Technology of 1,700 Victorian wills has provided the statistical evidence for what you might have already expected to hear.   The overwhelming majority of us leave all of our accumulated wealth to our immediate family members: first to our spouses, then to our children.  It doesn’t seem to matter how much wealth we’ve accumulated or whether or not we have contributed generously and passionately to charitable causes throughout our lives, when it comes to dividing up our estates – charities essentially don’t get a look in.

The question this raises is whether or not f this role modelling by older Australians has  doomed future generations to repeat this same pattern of estate-planning and overlook charitable giving  in their Wills too?

Let’s be clear, of course looking after our families comes first in most cases.   Adequately providing for those who are dependent on our financial support during our lifetimes is an important aspect of our estate-planning and decision-making. Our current family provision legislation and our ability to challenge the final wishes set out in our Wills ensures that the legal system makes this a reality.

There are however more significant levels of charitable giving through Wills in comparative countries:

In the UK, despite the fact that a very healthy looking 16% of British Wills that went into probate last year contained charitable gifts, the UK Government has introduced substantial financial incentives in an attempt to encourage further giving from personal estates to charitable causes (see www.legacy10.com  for more information).

In the US, the latest figures show that charitable giving through American Wills increased over 12% in the last year to a total of US$24.41 billion.

With our current levels of giving, Australia sits very low down on the league table of charitable giving from Wills.  We don’t believe this is something to be proud of.  We do see it however as a significant opportunity to improve.  The big question we face is “What we can do to inspire more Australians to leave money to charitable causes in their Wills?”

So, what can we do?

Many Australians will be shocked to learn that so few of us make any charitable provision what-so-ever in our Wills.  Given our self-perception as a generous nation, it is unlikely that most of us actually take a considered decision to specifically exclude charities; low participation rates are far more likely to come as a result of a general lack of awareness or falsely perceived barriers getting in the way.

Our current behaviour is unlikely to change without a collaborative and systematic approach to improving our attitude towards charitable giving through our Wills.  This is not an either / or decision. The challenge is not to try and get Australians to leave their entire estates to charities instead of their families.  The challenge is to get most of us to a point where we can consider leaving most of our estates to our families AND to include gifts as a small portion of our estates to our favourite charities.

The Include a Charity campaign (www.includeacharity.com.au) is a practical response to that very challenge. With some realistic, measurable and achievable goals in its attempts to bring about wide-scale social change, this is one of the only true cross-sector initiatives led by 140 Australian charities. With ambitious plans for further collaborative, collective joint impact initiatives, this is one social change campaign to watch.

The campaign has already delivered a wide range of targeted activities to introduce the idea of including charitable gifts in the nation’s Wills to a wider public audience. It is also seeking to increase the skills and sophistication of all in the sector in our efforts to encourage more Australians to take the step of including a charity when preparing their Wills.

We know that the challenge of tipping the very strong prevailing social norm in estate-planning away from thinking about “family only” and towards thinking in terms of “family first, philanthropy second” is large indeed.  It is important to the sector and to wellbeing of Australian society that we are able to make some significant inroads to change the current behaviour in estate-planning.

Arguably we have a window of opportunity to change Australian’s attitudes towards charitable gifts in their Wills of some 10 years.  If Baby Boomers start to include more charitable gifts in their Wills now, the sector will start to receive significantly increased income from this generation over the next 10-20 years.

We’d like to hear from you

The Include a Charity campaign is open to your suggestions and ideas.  We’d love to hear your reflections on what you think is needed to change our behaviour.

  •  How can we work together to inspire older Australians to act philanthropically, supporting their favourite causes at the same time as making sure their families are provided for?
  • Are Australian children entitled to challenge their parents from “spending the kids’ inheritance”?
  • Does the Government have a role to play in incentivising more charitable giving through Wills?

You can continue this conversation with Ross and Chris via the comments section below, or chat with them on Twitter via @ChristopherSWIN and @rossandersonIAC


2012 Trends in Philanthropy – Political Advocacy

As promised this post is going to continue to examine some of the trends for 2012 highlighted in Philanthropy and Social Investment Blueprint 2012 – the annual industry forecast produced by Lucy Bernholz.  In my last post I looked at the first of three major shifts identified in the Blueprint, today I’ll be moving on to trend number two: the implications of the US Supreme Court‘s Citizens United ruling on philanthropy and social investing.

There is no doubt that grantmakers here in Australia have a lot to learn from philanthropy overseas. I am often reminded however that much of how and why we practice philanthropy is unique.  By constantly casting an eye towards North  America and Europe we risk failing to recognise and value the innovation taking place in our own backyard. So what can we here in Australia possibly learn from examining the potential implications of the Citizens United US Supreme Court decision?

Before I address that question in detail, it probably serves to give a quick rundown on what that Supreme Court decision actually amounts to. In short Citizen United removed prior restrictions on spending by corporations on election campaigns; in essence allowing these bodies the similar first amendment rights to free speech as everyday American citizens. These newly available dollars will certainly come into play in 2012, the first presidential election year since the ruling was handed down. Rather than promoting and opposing political candidates or parties directly, much of the funding from corporations is likely to flow via non profit organisations advocating on issues that serve their purpose. It is the implication of that funding process has some interesting cross over with Australia.

Around the same time that Citizens United was taking it’s case to the US Supreme Court, here in Australia an international aid watch dog called Aid/WATCH was taking its fight to hold on to its charitable tax exemptions to the High Court. In Australia, like in the US, the judges ruled in their favour. The decision asserted that Aid/WATCH, as an independent watch-dog examining how aid is distributed, may well be involved in political advocacy.  Because the generation of public debate created by Aid/WATCH through their advocacy focused on the relief of poverty through foreign aid, the Judges ruled that it should not be excluded as a charitable activity. This ruling opened up direct funding of political advocacy by charitable trusts and foundations, ensuring that neither the donor, or the non-profit they were supporting, put their charitable status at risk. The Eggs have posted previously on the new place for advocacy in the Australian non-profit sector, but perhaps we have not explored the potential implications for donors in full.

In an environment more open to political advocacy from our non-profits, what are the potential implications on donors and ultimately donations? In the US, it’s likely that the Citizens United decision will lead to not only more political advocacy from non-profits but also more non-profits being created with a focus on raising money for or against their preferred candidates and issues.  Here in Australia, the likelihood is that we’re gong to see a greater intensity of out and out advocacy.  For some funders, the thought of seeing their long supported charities engaged in the political might be too much to bear.  For other funders it will open up spheres of influence like never before.

I’ve spoken with people on both sides of the advocacy fence, those that find philanthropic support of political advocacy unseemly and those that see it as critical vehicle in mission based philanthropy. Not all philanthropic organisations in Australia believe or want to be mission driven, the warm heart of benevolence for many is still the greatest motivator. There will always be a place for both. I do sense however, that the new wave of youth and online philanthropy in this country will drive a new era of donor funded advocacy.

Should you wish to learn more about the trends in philanthropy and social investment for 2012, I’d encourage you to get your hands on a copy of Blueprint 2012:

  • Hard copies from Lulu
  • PDFs at Scribd
  • Kindle version from Amazon
  • eBook from Smashwords. Also available for Amazon Kindle, B & N Nook and others.

You can follow the musings of Caitriona Fay on Twitter via @cat_fay or the blog via @3eggphil


The administration obsession

You may have seen a couple of articles run in the Sydney Morning Herald a fortnight ago examining the administration and transparency of some of Australia’s better-known celebrity foundations.  In the firing line were the McGrath Foundation, The Shane Warne Foundation, the Cathy Freeman Foundation and others. The journalists rightly point out a number of inconsistencies regarding the required public transparency of the non-profit sector here in Australia. Both articles contend that without adequate transparency the donating public can never know how much of their dollar is actually making it to their cause of concern.

The inconsistencies raised in the articles are nothing new to non-profits.  The sector has long struggled under the burden of a fragmented regulatory system and been crippled under the red tape of multiple compliance obligations. It’s hoped that the establishment of the Australian Charities and Non-profit Commission (ACNC) will help to reduce the burden on the non-profit sector while providing a new level of transparency sector wide.

What the two articles also helped to highlight was that there continues to be a lack of wider public understanding around administration costs in the non-profit sector. Held up for high praise were those organisations with the bare minimum of administration costs, while those with professional staff and overheads were the inferred to be less effective and somehow less impressive.

It might well be that those organisations highlighted in the article are ineffective but examining administration and fundraising costs will only paint a partial and sometimes misleading picture.

I’ve worked for a grantmaking organisation that was incredibly strong on applicant organisations submitting ‘real world’ budgets. A budget submitted without a provision for administration costs and contingencies was considered poor, full stop.  Administration costs were considered realistic if they were in the 8%-25% field (depending on the project type).  Any lower or higher and it deserved some prodding. Equally, it was considered poor project management if an applicant didn’t factor at least 10% of the total project costs for contingency costs.

For that particular grantmaking organisation, low administration costs increased the risk of the project operating at the margins, which in turn increased the risk of the project failing.  As a grantmaker they decided to mitigate against that risk. When I called organistions to ask why they had submitted application budgets with low or no administration costs their responses were generally the same – most thought putting the actual administration costs in the budget would reduce their chances of success with the grantmaker.

I’m reluctant to suggest that there is any ‘right’ range for administration fees. What’s really important is that donors examine the administration figures within the context of the organisation’s activities and mission. There is no one rule.  As a donor you need to be more savvy and a donating public we need to expect that administration costs are a reality for charities.

I’d also encourage donors to recognise that staff within the non-profit sector deserve to be adequately reimbursed for the work they do. One of the great tragedies of non-profit sector is our high staff turn-over, and inadequate remuneration is partly to blame. Working in the most challenging of areas, doing the toughest of work, it’s imperative that the non-profit sector hold on to good staff. That includes senior managers and CEOs whose leadership is so valuable in ensuring the ship is pointing in the right direction.

You can follow the musings of Caitriona Fay on Twitter via @cat_fay


Budget 2011

So what the heck does the budget really mean for the Not for Profit (NFP) sector? Well, in short it’s all about reform.

The big exciting news is that we’ll finally get a charities commission here in Australia. The Australian Charities and Not-for-Profit Commission (ACNC) will be launched on 1 July 2012 and will receive a $53.6 million injection from the Government over the next four years. Finally there will be a one-stop-shop for charities, responsible for determining the eligibility of organisations seeking charitable status as well as the implementation of the much sought after ‘report-once use-often’ reporting framework for NFPs. The arrival of the Commission will hopefully lead to the implementation of some of the recommendations of the 2010 Productivity Commission Report into the NFP sector.  A Government Taskforce will be established in July 2011 to take responsibility for getting the ACNC ready to launch into operations by July 2012.  While the makeup of the Taskforce is currently unclear, there will be a broader public consultation process with the NFP sector and relevant government agencies.

While the launch of the Commission is positive, there have been some mixed feelings around the announced budget crackdown on tax exemptions for businesses run by Not for Profit organisations. The media has focused on the implications of the closing of this loophole for organisations like Hillsong Church which operates the Gloria Jean’s Coffee Shop franchise or the Seventh Day Adventist Church which operates cereal company, Sanitarium. The basic gist of it is that any revenue generated by NFPs from commercial activities that are not directed back to their altruistic purpose will be subject to income tax.  Seem’s fair enough?  Well, maybe but here’s a great international comparison from Bronwen Dalton arguing that the only winners in this closing of the loophole are the lawyers and accountants.

The final big piece of news from the Budget for the Not for Profit sector is the government announcement that it will introduce a statutory definition of ‘charity’ by July 2013. Basically, someone has decided that a 400 year old definition of charity is simply not good enough.  While the broad nature of the current definition has caused problems the review seems to be a reaction to Aid/Watch decision from the High Court late last year. The Government has committed to providing $2.9 million over four years to the ACNC (tough first up job) to assist with the reassessment of the charitable status of entities on the basis of the new statutory definition.

For more information check out the the media release from The Hon Bill Shorten